Marriage Contracts / Cohabitation Agreements

Marriage Contracts

Marriage contracts or pre-nuptial agreements (“Prenup Agreement”) can be put in place at the beginning of a marriage with the purpose of further defining the outcome should the marriage dissolve beyond the standard definition by law.  A well-devised and proper marriage contract can help avoid litigation and reduce the time and costs of a separation or divorce.

Cohabitation agreements

Cohabitation agreements are similar, and would be used for couples choosing to live together without entering a marriage. Should a couple with a cohabitation agreement later marry, the cohabitation agreement can be amended or a new marriage contract can be created to override the cohabitation agreement.

Do I need a Marriage Contract? Do I need a Cohabitation Agreement?

If you are planning to move in with or marry a spouse, the first question you may ask is whether a Cohabitation Agreement or Marriage Contract is necessary. These agreements, called “Domestic Contracts” under section 51 of Ontario’s Family Law Act, are often a good idea if a person has substantial assets and income, or has had previous experience going through the courts for separation. A desire to protect pre-acquired assets or an anticipated inheritance for children of a previous marriage will also be an impetus for such agreements.

Why you should consider a prenuptial or cohabitation agreement

Domestic Contracts can be used to limit one’s exposure to Ontario’s Net Family Property regime, in which spouses share in assets that a spouse has acquired during the marriage. Under this regime spouses can also have equal rights over the matrimonial home. Domestic Contracts can be used to limit one’s exposure to these claims, as well as claims for spousal support.

How the contracts are defined

Although Marriage Contracts and Cohabitation Agreements are treated separately under Ontario’s Family Law Act, under sections 52 and 53, respectively, a Cohabitation Agreement is deemed to be a Marriage Contract if the parties marry each other. This often blurs the distinction between the two agreements. The important thing is that under either agreement, the parties should define as clearly as possible their expectations before any rights are vested or entitlements arise. While Marriage Contracts can be entered even after the parties are married, things are a lot simpler if such agreements are entered into at the outset.

Enforcability of the contract

Under section 55 of Ontario’s Family Law Act, a Domestic Contract only has to be in writing, signed by the parties and witnessed. But rarely is this enough to make an agreement enforceable – especially if it is an agreement that severely limits one of the spouse’s rights to equalization or spousal support. This is because under section 56 of Ontario’s Family Law Act, a person can move to set aside a Domestic Contract in court, if:

1. a party failed to disclose to the other significant assets, debts or liabilities existing when the Domestic Contract was made;
2. a party did not understand the nature or consequences of the Domestic Contract;
3. otherwise in accordance with the law of contract.

This often means that if people wish to enter into an enforceable Cohabitation Agreement or Marriage Contract it would be beneficial to:
obtain a lawyer;

1. prepare a sworn financial statement;
2. disclose all assets and liabilities existing at the time;
3. sign a properly drafted agreement as drafted by counsel.